Democrat Lawmakers Urge Compliance with California Student Loan Act

U.S. Sen. Kamala D. Harris and U.S. Rep. Susan Davis were joined by five other California Democrats in sending a letter Tuesday to a student loan servicing company rejecting its claim that it can’t comply with California’s Student Loan Servicing Act because of federal law.

The act – sponsored by Harris when she was the state’s attorney general and signed into law in 2016 – requires the California Department of Business Oversight to license student loan servicers operating in the state. Nelnet says its subsidiary, Great Lakes Educational Loan Services, can’t comply because of a recent notice of legal interpretation on “preemption” by U.S. Secretary of Education Betsy DeVos.

U.S. Senator Kamala Harris

But the group of lawmakers strongly opposes the interpretation, arguing that it has no legal basis. In addition to Harris and Davis, the letter also was signed by U.S. Sen. Dianne Feinstein and U.S. representatives Mark DeSaulnier, Mark Takano, Maxine Waters and Julia Brownley.

“Consumer protection has long been a responsibility shared by the federal government and the states, both within the student loan market and across the financial sector,” the letter said, in part. “We do not believe your assertion that state regulation does not apply to student loan servicing conducted by Great Lakes has basis in federal statute or is consistent with Congressional intent.

“We believe your legal interpretation and that of the U.S. Department of Education rejects a broad bipartisan consensus among state governors, law enforcement officials, banking regulators, and lawmakers. We are deeply concerned by Nelnet’s disregard for the rights of states and student loan borrowers. Absent a clear instruction from Congress to be able to shield your company from regulators, Nelnet and Great Lakes must comply with state law.”

A recent report by the federal treasury department criticized the education department’s oversight of the federal student loan program and challenged DeVos’ argument that states lack the authority to regulate federal student loan servicers.